Manufacturers deserve a break

Proposed sales-tax exemption could generate jobs

Employees work at the PGT Industries production facility in Venice. PGT,
which makes storm-resistant windows and doors, is among the local companies
that could benefit from a proposed sales-tax exemption for manufacturing
equipment.

STAFF PHOTO / ELAINE LITHERLAND

Published: Wednesday, April 24, 2013 at 1:00 a.m.

Last Modified: Tuesday, April 23, 2013 at 7:54 p.m.

Gov. Rick Scott is personally trying to manufacture support in the Florida Legislature for eliminating the sales tax applied to the purchase of manufacturing equipment.

In this instance, we hope Scott succeeds and legislators heed his call for this change in tax policy.

Historically, Democratic and Republican legislators in Florida have been quick -- often too quick -- to grant sales-tax exemptions. But the Great Recession, which caused tax revenues to plummet, made the Republican-led House and Senate hesitant to approve exemptions that might lead to short-term declines in tax dollars.

Now that the state's economy is recovering and Florida has a modest budget surplus, the Legislature can responsibly consider a targeted exemption -- so long as it has the potential to generate more tax revenue, and jobs, over the long run.

Scott believes that exempting the purchase of manufacturing equipment from the state's 6 percent sales tax would meet those criteria. We do too, and so do 40 other states and Florida TaxWatch, an independent organization that studies tax policies.

Investment discouraged

Senate Bill 518 and House Bill 391 would turn Florida's partial exemption into a complete break.

A full exemption would reduce Florida's sales tax revenue by about $115 million in the first year of implementation. That amount is significant but: The 6 percent statewide sales tax (local governments can add more) generates more than $20 billion annually.

It is difficult to predict how many jobs would be created -- and, in turn, the amount of taxes that would be paid -- if Florida exempts manufacturing equipment from the sales tax. But TaxWatch makes a solid case that investments in manufacturing are curtailed by the sales tax; what's more, today's manufacturing jobs, including those in high-tech industries, generally pay above-average wages and help spin off significant economic activity. That is one reason that Manatee County is attempting to spur manufacturing at and near Port Manatee.

The Internet factor

The manufacturing exemption is in play partly because the Legislature appears prepared to require certain out-of-state retailers to collect the state's sales tax when they sell goods online to Floridians.

Economists estimate that Florida lost at least $454 million last year in sales tax revenue on goods purchased from out-of-state, Internet-only retailers.

Since Scott and legislative leaders have insisted the online tax be "revenue neutral," some tax cuts will emerge. Lowering Florida's communications tax, as Sen. Nancy Detert, a Sarasota County Republican, has proposed deserves serious consideration. But no tax reduction makes more sense -- or offers more promise for generating jobs and economic development -- than the proposed exemption for manufacturing equipment.

<p>Gov. Rick Scott is personally trying to manufacture support in the Florida Legislature for eliminating the sales tax applied to the purchase of manufacturing equipment.</p><p>In this instance, we hope Scott succeeds and legislators heed his call for this change in tax policy.</p><p>Historically, Democratic and Republican legislators in Florida have been quick -- often too quick -- to grant sales-tax exemptions. But the Great Recession, which caused tax revenues to plummet, made the Republican-led House and Senate hesitant to approve exemptions that might lead to short-term declines in tax dollars.</p><p>Now that the state's economy is recovering and Florida has a modest budget surplus, the Legislature can responsibly consider a targeted exemption -- so long as it has the potential to generate more tax revenue, and jobs, over the long run.</p><p>Scott believes that exempting the purchase of manufacturing equipment from the state's 6 percent sales tax would meet those criteria. We do too, and so do 40 other states and Florida TaxWatch, an independent organization that studies tax policies.</p><p>Investment discouraged</p><p>Senate Bill 518 and House Bill 391 would turn Florida's partial exemption into a complete break.</p><p>A full exemption would reduce Florida's sales tax revenue by about $115 million in the first year of implementation. That amount is significant but: The 6 percent statewide sales tax (local governments can add more) generates more than $20 billion annually.</p><p>It is difficult to predict how many jobs would be created -- and, in turn, the amount of taxes that would be paid -- if Florida exempts manufacturing equipment from the sales tax. But TaxWatch makes a solid case that investments in manufacturing are curtailed by the sales tax; what's more, today's manufacturing jobs, including those in high-tech industries, generally pay above-average wages and help spin off significant economic activity. That is one reason that Manatee County is attempting to spur manufacturing at and near Port Manatee.</p><p>The Internet factor</p><p>The manufacturing exemption is in play partly because the Legislature appears prepared to require certain out-of-state retailers to collect the state's sales tax when they sell goods online to Floridians.</p><p>Economists estimate that Florida lost at least $454 million last year in sales tax revenue on goods purchased from out-of-state, Internet-only retailers.</p><p>Since Scott and legislative leaders have insisted the online tax be "revenue neutral," some tax cuts will emerge. Lowering Florida's communications tax, as Sen. Nancy Detert, a Sarasota County Republican, has proposed deserves serious consideration. But no tax reduction makes more sense -- or offers more promise for generating jobs and economic development -- than the proposed exemption for manufacturing equipment.</p>